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What Credit score Do You Need to Qualify for A Mortgage?

By October 10, 2016 October 17th, 2019 No Comments

What Credit score Do You Need to Qualify for A Mortgage?

If you want to purchase property or refinance an existing mortgage, you probably know how important a good credit score is. Typically, mortgage lenders and banks use your credit score to evaluate how credit-worthy you are. This, in turn, could translate to either a lower or higher mortgage interest rate besides determining your eligibility.

 What Credit Score Do Lenders Use?

Your credit score is the most significant factor in determining your mortgage eligibility. With this in mind, you might start wondering about the credit scores that lenders use. Well, FICO scores are ones that mortgage lenders use. These scores are the industry standard and are relied upon by nearly all lenders that you will come across. The three principal FICO scores that you should be particularly concerned about are the ones from Experian, TransUnion, and Equifax. These are the most prominent credit bureaus.

Know Your Credit Score before Applying for Mortgages

Before heading out to apply for a mortgage, it’s advisable to evaluate your credit score. This should be done months in advance since any significant improvement in your credit card could take some time. For instance, legitimate issues that might be holding down your score can take several months to get cleared.

Similarly, credit bureaus are quite bureaucratic, thus the need to start improving your score early. You should opt for a service that lets you use the three major credit bureaus. Mortgage lenders tend to pull tri-merge credit reports, which include scores from the three bureaus. The information on each of the three reports might be different.

 Lower Credit Scores Translate to Higher Mortgage Rates

If you have a lower credit score, you will end up with higher mortgage rates, and vice versa. It’s all about risks because a lower credit score means you are likely to default on your loan. Therefore, if your credit score is low, there’s a possibility that you won’t even get approved for a mortgage. In recent years, mortgage lenders and banks have become more stringent by requiring mortgage applicants to have even higher scores than they had to have in the past.

 Any Score Below 620 is Considered Subprime

When it comes to traditional mortgages, credit scores below 620 are considered subprime. If you have such a score, you will find it challenging to qualify for a mortgage. Ideally, you need a credit score of 720 to avoid possible pricing adjustments. A score of 760 may be required if you want the lowest rate and the best possible terms. With an excellent credit score, you can even get a lower mortgage rate.

Credit Score Tips for Finding the Best Mortgage

A credit score is the most significant factor when determining your mortgage eligibility

  • You should aim at attaining a credit score of at least 760 to get reasonable rates
  • You should understand the contents of your credit report and what your score is before your lender does.
  • Mistakes or missteps can easily get corrected. Nonetheless, this takes time
  • The FHA currently requires a credit score of at least 500 or 580 if you can put down less than 10%
  • Regular loans require a minimum score of 620
  • A credit score below 620 is considered subprime, and therefore, will be priced higher
  • Typically, lenders sum up your three credit scores to derive a median score that determines your qualification
  • A low credit score may disqualify you from some loan programs besides limiting your options
  • Never mess with your credit score in the months preceding the loan application

If you want to find out whether you qualify for a mortgage, get in touch with us via 702.545.0020. We will help you land some of the most affordable home loans in Las Vegas.

 

 

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